Designing Business: Use Design to Create a New Business Model

Companies that do not innovate die. ‘Just’ innovating products or services is no not enough to create sustainable competitive advantage in a global market. Customers become easily commoditized and competitors follow quickly. To garner the most impact, is to create a new, disruptive business model, in order to …

Companies that do not innovate die.

‘Just’ innovating products or services is no not enough to create sustainable competitive advantage in a global market. Customers become easily commoditized and competitors follow quickly.

To garner the most impact, is to create a new, disruptive business model, in order to completely change the game and create new markets – but the question is how?

To explore the ‘white space’, companies must be open to experiment and learn from failure. Hereby, it is not possible to refer to an existing amount of data in order to analyze the best option. On the contrary, due to a huge lack of data, the process is based on effectuation, taking actions first and generating data from the derived consequences. In other words innovating companies must experiment and learn from failures. The starting point is to have a deep understanding of the current business model and assess it upon its strengths and weaknesses, which represents the first major challenge for organisations. Apart from the fact that no universal definition exists, it is difficult to deal with the complexity of all the interrelated core elements.

Design thinking provides the best practices by simplifying with the use of visual tools. Moreover, the philosophy of design thinking which refers to the use of ‘left brain and ‘right brain’ capabilities including intuition, empathy and creativity as well as rationalism, analysis and reasoning, is best suited to developing radical new ideas. A several stage iterative process, which borrows the main stages from design thinking – inspiration, ideation and implementation – allows us to see the business context from entirely new angles, brainstorming new alternatives, and quickly and cheaply prototyping radically new ideas. This requires the combination of creativity as well as strategic business tools.

Sine qua non, companies must escape their dominant mindset and ask ‘what if?’ questions instead of recalling past experiences. To reduce the ‘dominant logic’ as well as the influence of the current cross-functional business dedicated teams, consisting of internal and external managers, companies must develop and test new business models autonomously. Once an alternative fulfills all predefined criteria an organisation can then decide if it can be integrated into the current model, or whether a new business unit needs to be established. This depends on the fit or misfit of the demanded norms, processes and values.

As business model innovation becomes more and more a strategy in itself, it is conducted continually and gives the organisation big challenges: it becomes an ambidextrous organisation, as it has to deal with two distinct businesses at the same time: a prevailing and an evolving one.